No more twinkies to be made vol. start stocking up on them

[stunnafasho03]

 

[mojodmonky1]

CNBC

Spoiler: Warning: Spoiler!

[h1]How Hostess Failed: Hedge Funds vs. Unions[/h1]

Published: Friday, 16 Nov 2012 | 12:09 PM ET

By: John Carney

Senior Editor, CNBC.com

When Hostess Brands announced that it would close up its operations, the forces most responsible for that decision were two hedge funds that control hundreds of millions of Hostess debt and which have finally decided they won't squeeze any more filling into the Twinkie.

The funds, Silver Point and Monarch, are what are known as distressed debt investors. They buy the debt of troubled companies—usually at steep discounts. Some consider them white knights who are willing to take make risky investments in companies on the verge of failure. Others say they are “vulture funds.”

Only Silver Point and Monarch could have kept Hostess out of liquidation and kept the Twinkie bakery ovens firing. But they were, ultimately, unable to reach a deal with the unions that represents the workers who make and deliver products like Twinkies, Wonderbread and Ding Dongs. Without large union concessions—what some would say, total union capitulation—the hedge funds decided Hostess would have to die.

This is not the first time Hostess Brands has entered bankruptcy. Weighed down by an balance sheet heavy with debt and pension obligations, costly labor rules, and declining sales, the company sought bankruptcy protection under Chapter 11 in 2004.

After nearly five years in bankruptcy, Hostess emerged in 2009 under the control of a private equity firm called Ripplewood Holdings, which invested $130 million of new capital in the company. The keys to coming out of the bankruptcy the first time around were concessions by the two groups most responsible for Hostess falling back into bankruptcy just 3 years late: the unions and lenders that owned secured company debt nominally worth around $450 million.

In the deal that allowed Hostess to come out of bankruptcy, the unions agreed to concessions that would save the company around $110 million a year in labor costs. The lenders, led by the hedge funds Silver Point and Monarch, agreed to provide a new secured loan of $360 million, forgive half the existing debt, and exchange the rest of that debt for a payment-in-kind loan.

It’s worth mentioning that we don’t know how much of a loss—if anything—Silver Point and Monarch took on the loans by agreeing to reduce the amount outstanding. As David Kaplan pointed out in his extensively detailed article in the August 13th issue of Fortune, the amounts the hedge funds paid for the debt are not in the public record. Distressed debt funds—critics call them vulture funds—typically pay far less than face value when buying the debt of troubled companies.

This wasn’t enough to save the company.

The company’s sales declined and attempts to roll-out new products more in line with changing consumer tastes flopped. Ripplewood put tens of millions more into the company in the form of new equity and subordinated debt. Silver Point and Monarch put in another $30 million and then, after the company filed for Chapter 11 again in January of this year, another $75 million.

What happened next was just a mess. The CEO quit. The unions described the pay of the new CEO as “looting.” Acrimonious would be a very mild term to describe relations between management and the unionized workers. One person familiar with the matter described it as “all-out war.” The place to turn for the details of this is, again, David Kaplan’s Fortune article.

Ripplewood basically fell out of the picture during this period. Its equity investment was worthless, and it’s subordinated debt was deeply underwater. It just stopped showing up at negotiations with the unions, according to Kaplan.

The folks left at the negotiating table with the unions were Silver Point and Monarch.

Here’s how Kaplan put the situation as of last summer:


What the hedge funds want is some degree of capitulation from a union whose members will otherwise lose thousands of jobs in liquidation. If the hedge funds don't get it, they've concluded, the company isn't worth saving. Without the hedge funds' blessing, no Hostess turnaround is possible. Right now, according to sources with knowledge of Hostess's debt structure, Silver Point and Monarch each hold Hostess obligations with a market value of between $50 million and $100 million. Those sources also say each hedge fund probably paid somewhere between $125 million and $175 million for that debt. So even with losses to date, both hedge funds have ample skin in the game -- skin they'd like to get out of the game sooner rather than later. Of course, if the hedge funds again forgive sizable debt, they'll probably want sizable equity in return this time.

Finally, there are the woebegone Teamsters. They have plenty of skin as well -- and feel as if they've been fleeced out of almost $100 million from Hostess after the company "temporarily" ceased making union pension contributions last August. That move by Hostess was a breach of its collective-bargaining agreement with the unions. The Teamsters' leadership has fulminated to its membership about the hedge funds in particular. "The financial folks make a living of feeding off distressed companies," Hall says. "They lose sight of the fact that there are real families with livelihoods at stake." At local unions across the country, the hedgies have become the devil incarnate.


Now we know how this story ends. The Teamsters agreed in September to a deal with reduced pay and benefits. But the Bakery Workers union rejected the deal and went on strike. Hostess warned that if the strike continued it would not be able to stay in business. But the strike went on. And now Hostess is out of business.

The hedge funds concluded that Hostess isn’t worth saving. The unions either bet the hedge funds would blink before putting the company into liquidation or decided that it was better to sacrifice the jobs of Hostess workers than give in to demands for further pension concessions.

Although it now appears that Hostess is done, this is not the end of the story. The brands Hostess owns retain value. Someone will likely produce Twinkies again. The plants and workers are also valuable and will likely find bidders. Silver Point and Monarch—as well as the other secured creditors—will realize some value for their investment in the company, although certainly far less than they had hoped. (But, since we don’t know how much they spent on the debt, we may never know whether they gained or lost on the deal.)

And, of course, we’ll be in for a long bout of recriminations as everyone involved points fingers at everyone else. The truth of the matter may just be that Hostess was a failed enterprise that just could not be saved.

thank you for posting. solid read. repped.

 

[thorrocksjs]

I was jamming g -dep and now i feel terrible Hostess snacks are higher quality than little debbies . Taste better and everything .

 

[superantigen]

1 to rock eat, 3 to stock



...

 

[servechilled81]

Hostess tastes more artificial to me than little debbie

Fudge Rounds and Oatmeal Cream Pies>>>

 

[hellaones]

another staple of my childhood gone


somebody fedex me some icey white honey buns

 

[knowledgebones72]

So will there be an increased resale value for Hostess products soon, or would this a down the line type of thing?

 

[rocman23]

does that mean no more fruit pies

 

[lil black jean jacket]

aw mane

 

[water]

Generic twinkies tho, but is hostess gone forever?

The whole company is filing for bankruptcy. 

 

I feel bad for all the employees that got laid off and didn't go on strike. 

 

[powerballin]

If its true they don't go bad I'm gonna stock up and make a killing in 2034.

I got some cases of original four lokos too.  

If anybody needs that fruitopia for the low I got that too

 

[outlaw8413]

Apparently they're selling the brands so you'll probably still get a twinkle but its still up in the air whether or not they use the same distributors for their ingredients which means those "new" twinkies might taste different

 

[Coupé It]

I feel bad for upcoming generation of kids, they dont have anything to enjoy.

You serious? You want your kids eating this crap? This is enjoyable?

I feel bad for the kids of most people who've never been to a legitiment bakery.

As for Hostess going out of business - good, besides the workers this should have been out of our stores years ago.

 

[jjs07]

You serious? You want your kids eating this crap? This is enjoyable?
I feel bad for the kids of most people who've never been to a legitiment bakery.
As for Hostess going out of business - good, besides the workers this should have been out of our stores years ago.

I feel bad for food elitists/snobs who can't appreciate a twinkie.

 

[marinadelrey]

good

 

[finallyfamous]

First thing I thought of was Zombieland

Are those Ebay pics real? my gawd

 

[thorrocksjs]

Dudes hating on snack cakes now.Hostess has as much right to the market as those overpriced whole food drinks and over priced trader joes snacks .Its a free market a day I don't want to eat a piece of fruit I should have the right to eat a Twinkie one Twinkie won't kill anybody it's called moderation .Id hate for the to leave they are as iconic as Levi jeans,chuck Taylor's ,hamburgers fries ,shakes,super soakers to American youth culture and Americana in general .

 

[JonathanLegend]

[h1]Chris Christie Refuses to Answer Question About Twinkies: ‘This Is a Setup! You People Are the Worst’[/h1]
Chris Christie's love of junk food speaks for itself, but at a news conference today, one reporter still sought comment from the New Jersey governor about the just-announced shutdown of Hostess Brands, Inc.

Surprisingly, and probably for the first time, Christie refused to open up for Twinkies.

"You people are the worst! This is a setup! I am not answering questions on Twinkies," Christie said, noting that he's "on Saturday Night Live  enough."

"It's bad that I even said the word 'Twinkie' from behind this microphone," he added before moving on to the next question, which he warned had better not be about Devil Dogs.

Meanwhile, others around the country are taking the impending Twinkies shortage a bit more seriously. Some have taken to hoarding supplies, while others are "sharing" their wealth by selling boxes of the snack cake for hundreds, and even thousands.

[video via GovChristie]

 

[knowledgebones72]

lookin on ebay....a box of 10 is going for like 10-20 bucks, but i have a feeling it's sellers inflating their own prices bidding on stuff themselves from different accounts.

what ya'll think? NT could get a good Twinkie ring going.

If there's any possibility of these things becoming a collector's item i'll grab hella boxes, other NTers can do the same, and we all just take over ebay and buy sell from one another to replenish supplies and keep the price going upward.

 

[meek meals]

Not my Zebra Cakes damnit.

 

[00david00]

overrated

 

[Coupé It]

I feel bad for food elitists/snobs who can't appreciate a twinkie.

Proud of it, nothing to appreciate.

 

[createdestroy]

View media item 138349

 

[munnnjee]

never had one in my life...wonder if i should go try one now.

 

[david bowman]

I just went to the store and everything was gone